TaxTMI 
TaxTMI 
2016 (5) TMI 84
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....nd clearance of molasses is physically controlled by the State Excise Department as molasses is a raw material for the manufacture of potable alcohol. An Excise Inspector stays in the factory premises and undertakes frequent physical verification of the stock of molasses. This physical verification is done at random by a dip rod method. Whenever a physical verification is undertaken, the physical stock of molasses is ascertained and the same is intimated to the State Excise Department as well as to the Central Excise Department. 2. Molasses is a highly sensitive and volatile goods. The volume of molasses, which are stored in steel tanks and pucca pits, expands with the rise of temperature and there is a heavy risk of auto combustion. Con....
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....e tune of 5000 quintals was found in excess. Information of this excess stock was given to the U.P. Excise Department as well as to the Central Excise Department. 4. The Central Excise Department directed the appellant by letter dated 8.6.2006 to clarify the circumstances which caused an increase in the stock of the molasses. The query of the Department was duly replied, in spite of which, a show cause notice dated 26.6.2007 was issued alleging that the increase in the volume of molasses after closure of the factory indicated clandestine manufacture of sugar which was cleared without payment of duty and consequently, directed the appellant to show cause as to why duty on clandestine removal of sugar should not be imposed along with penal....
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....is legally justified in as much as the same has been passed on the basis of assumptions, conjectures and surmises & ignoring evidence on record ? 7. We have heard Sri Nishant Mishra, the learned counsel for the appellant and Sri Siddharth Shukla, the learned counsel for the Department. 8. We find that demand of duty is based on an assumption that declaration of excess quantity of molasses by the appellant is indicative that the appellant must have purchased and crushed the additional quantity of sugar cane and that corresponding quantity of sugar was manufactured and cleared clandestinely. This assumption for imposition of duty and penalty is based purely on surmises and conjectures and is totally unwarranted. 9. We find that the s....
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....ry to keep the temperatures at a lower level for which purpose water is sprinkled on the tanks in order to reduce the internal temperature. The sprinkling of the water at times seeps into the molasses tank and pucca pits, which results in the increase in the volume of molasses. 11. We are of the opinion, that the mere fact that the volume of molasses has increased after the closure of the factory, i.e., after the manufacturing of sugar comes to an end cannot lead to a presumption of clandestine manufacture of sugar and consequently, removal of sugar without payment of duty nor can it lead to a presumption that a fraud has been played by the appellant. 12. We are of the opinion that there should also be clinching evidence in the nature....
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....ence of any such evidence demand cannot be imposed. The said decision is wholly applicable in the instant case. 15. Consequently, the authority including the Tribunal committed an error in imposing payment of duty on clandestine removal of sugar, which is based on surmises and conjectures and on assumption without there being any tangible evidence. The payment of duty, interest and penalty consequently cannot be sustained and are set aside. Question No.B is, accordingly, answered in favour of the appellant and against the Department. 16. In view of the aforesaid, it is not necessary for us to decide question No.A as the same has becomes academic. However, we are of the opinion, that once a finding has been given by the Tribunal that t....